Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

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Multiple Choice

At which step of the accounting cycle are balances analyzed and adjusting entries, such as those for accrued expenses, recorded?

Preparing the trial balance

Adjusting entries step

Closing entries step

Posting to the ledger

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Verified step by step guidance

Understand the accounting cycle: The accounting cycle is a series of steps that businesses follow to record and report financial transactions. Key steps include journalizing transactions, posting to the ledger, preparing a trial balance, making adjusting entries, preparing financial statements, and closing entries.

Identify the purpose of adjusting entries: Adjusting entries are made to ensure that revenues and expenses are recognized in the correct accounting period, following the accrual basis of accounting. These entries typically involve accrued expenses, accrued revenues, prepaid expenses, and depreciation.

Determine when adjusting entries are recorded: Adjusting entries are made after the trial balance is prepared but before the financial statements are finalized. This ensures that the trial balance reflects accurate and up-to-date account balances.

Analyze balances for adjustments: At this step, accountants review account balances to identify any discrepancies or unrecorded transactions that require adjustment. For example, accrued expenses (expenses incurred but not yet paid) are recorded as liabilities and expenses.

Recognize the step in the accounting cycle: The step where balances are analyzed and adjusting entries are recorded is specifically called the 'Adjusting entries step.' This step ensures that the financial statements are accurate and comply with accounting principles.